BIDU Shares Rise Overnight On AI Catalyst: Chip Unit Reportedly Pursues $50B Hong Kong IPO

• Kunlunxin confidentially filed for the Hong Kong IPO in January.
• Baidu’s Hong Kong shares rose by over 7% in the afternoon local time on Monday.
• Baidu set up Kunlunxin in 2011 as an internal chip development unit, which was spun out as an independent company in 2021.

U.S.-listed shares of Baidu, Inc. were up 3% in overnight trading ahead of Monday on reports that its AI chip unit Kunlunxin is targeting a valuation of $50 billion in an initial public offering in Hong Kong.

Baidu said in January that Kunlunxin had confidentially filed ‌for a ⁠listing, but had not disclosed the size of the offering. 

The Information reported the target valuation on Sunday, citing people familiar with the matter, adding that prospective investors have been asked to purchase chips worth three to seven times the value of their intended subscription in Kunlunxin’s IPO.

Baidu’s Hong Kong shares were up by over 7% in the afternoon local time on Monday.

What Does Kunlunxin Do?

Baidu set up Kunlunxin in 2011 as an internal chip development unit, which was spun out as an independent company in 2021, with Baidu retaining a controlling stake. 

The unit designs AI processors used for training and inference workloads in data centers and cloud computing, positioning itself as one of China’s leading domestic alternatives to Nvidia. 

Until recently, Kunlunxin primarily supplied chips to Baidu, but it began expanding sales to third-party customers over the past two years. Its external customers now include Tencent, while ByteDance has explored using its chips. 

The company also reportedly supplies AI chips for projects involving Chinese state-owned enterprises, telecom operators, and government-backed data centers. 

BIDU Stock Move, Retail View

Like other Chinese tech stocks, BIDU has had a challenging last few months. The stock slid sharply this month and is now down over 20% year to date. Alibaba stock is down 35% in this period, while the KraneShares CSI China Internet ETF (KWEB), which tracks Chinese tech stocks, has declined 30%.

BIDU shares face pressure amid slowing growth in its core online advertising business and concerns that intensifying competition in China’s AI market will make it harder to monetize its large investments in AI. Investors have also remained cautious about the pace of returns from the company’s AI and cloud initiatives.

On Stocktwits, the retail sentiment for BIDU shifted to ‘extremely bullish’ from ‘bullish’ the previous day, with investors noting the Kunlunxin IPO news as a substantial catalyst. “$BIDU Let’s go - time to rebound!” a user wrote.

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